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The Deal from Hell: A Cautionary Tale Every Publisher Should Read

A universally important book, The Deal From Hell: How Moguls and Wall Street Plundered Great American Newspapers by James O’Shea shows the ease with which moneymen incur debt and ruin companies.

Book Review by Peter Cook

The Deal from Hell by James O'Shea

The Deal From Hell: How Moguls and Wall Street Plundered Great American Newspapers by James O’Shea, published by Public Affairs / Perseus (June 28, 2011), Hardcover, 416 pp. $27.99/32.50 Canada ISBN 978-1586487911

Mr. James O’Shea’s beguiling admixture, the eyewitness-cum-memoirist, combined with his Pulitzer-laden editorial pedigree makes for jaw-dropping vignettes, hilarious asides and harrowing portraits of pinstriped idiocy. But is The Deal from Hell important? Hell, yes. Every citizen in the republic — and every C-suite publishing executive — should hear what this book has to say, if only to discover how desperately besieged is our fount of Public Discourse.

If the cover art were to depict the book’s al fresco skyscraper balcony fellatio scene, throngs might be induced to queue up. But since the purveyors of Mr. O’Shea’s fascinating and outrageous story seem anachronistically ill-disposed to prurience, the book may be doomed to the tough sell of the sane and the decent…just like the bitingly incisive insider look-see from Mr. O’Shea’s predecessor eighteen years earlier (Read All About it! The Corporate Takeover of America’s Newspapers by James D. Squires, Times Books/Random House, 1993) whose Pulitzer-laden editorial pedigree made for one helluva cautionary tale, but…

Mr. O’Shea’s book, a whole generation later, is no warning of things to come. It comes with the immediacy and necessity of disaster reportage: the devastation, much greater than we knew; the stakes, much higher than we thought; and the survivors, much worse off than we imagined.

Nutshell: Mr. O’Shea tells how he came to know and love reporting and how, for a time, he came to edit the daily news in Chicago and Los Angeles. He tells how men with little knowledge of and no love for reporting and editing the daily news came to run and then wreck one of the largest news and entertainment media conglomerates in the United States — Tribune Company. From inside its newsrooms, Mr. O’Shea shows and tells how it felt and what it looked like as Tribune Company cashed in its billion dollar head start in Internet technology to chase a siren called “synergy,” borrowed its way into the biggest tax dodge in history (U.S. Tax Court Docket No. 17443-02) and then proceeded to borrow its way into the biggest media bankruptcy in history (U.S. Bankruptcy Court Docket No. 08-13141).

Style: Through 21 single-sitting article-length servings, the reader becomes privy to the viscerally incompatible forces that share nothing in common but the roof and the vault. The reader comes to feel the paradox that is 21st century newspapering: “Journalism,” that mythic metonym where lucre is measured in Pulitzers, the gratitude of the newly-freed, wrongly condemned and other heartfelt attaboys, will only survive in schoolbooks and scrapbooks; stock upticks and debt service rule. Mr. O’Shea steeps the reader in the near-history of Colonel Robert R. McCormick’s Chicago Tribune and the Chandler Clan’s Los Angeles Times (the two organs atop Tribune Company’s quondam empire). Mr. O’Shea rises to managing editor (Chicago) and editor (Los Angeles) to steward that seminal fount of Public Discourse — the front page — as best he can while cutting corners and ending careers by the dozens in service of budget chop logic.

He deftly mixes the newspaper narrative “feature” with an investigative veteran’s nuts-n-bolts hardness in rendering Tribune Tower’s antic machinators. His facility with mid-action portraiture verges on the sublime. Meet the Wall Street-trained investment banker whose ascendance through Tribune Company’s executive suites afforded him a grasp not matched by reach:

When [John W.] Madigan traveled to Washington to attend the fabled Gridiron Dinner just after he’d been named publisher, he couldn’t get over how journalists and dignitaries fawned over Arthur Sulzberger and Katharine Graham in the drawing-room parties that preceded the dinner. Riding the elevator together after the show, Madigan expressed his frustration to Tribune bureau chief Nick Horrock, wondering why Sulzberger and Graham got so much attention while he got so little. “I explained to him that they came from newspaper families and were not just people who ran corporations. He took it pretty well,” Horrock recalled.  When asked about reasons for the shabby treatment years later, Madigan would say, “I think it’s a coast issue. I think New York and Los Angeles look down on Chicago. We’re not as good as good as they are.  I think it’s just a feeling of superiority.”

Mr. O’Shea reveals a hint, if not a theory, as to why Tribune Company would come to bet the ranch on a song and a prayer:

The white tour bus carrying John Madigan weaved through the streets of Havana. Once again, he and an entourage of Tribune Company executives had come to Cuba with the hope of interviewing Fidel Castro, and once again, Castro had stiffed them…for the second time in six years, the dictator gave the cold shoulder to the CEO of Tribune Company, head of a widely admired Fortune 500 corporation and a group of executives who ran newspapers covering the world’s largest diaspora of Cubans. As his bus passed bicycles and aging cars plying the frenetic streets of Havana, Madigan muttered to a colleague disconsolately, “We just aren’t big enough.”

Then,

[Madigan] had challenged David Hiller, a lawyer turned newspaper executive in charge of the company’s development arm, to come up with transformative ideas that would put the Tribune on the nation’s media map. He did not want one of those one-off TV station deals that had become standard fare at Tribune [Company], but something big. Hiller’s response: Buy Times Mirror.

As the play-by-play unfolds, the reader is treated to a tragicomic cast of characters. Mr. Hiller, who enters as Tribune Company General Counsel, would one day climb to run the Los Angeles Times as publisher:

He successfully lobbied the Chicago Cubs and the Los Angeles Dodgers to let him sing the national anthem in Wrigley Field and Dodger Stadium. At a staff party celebrating the paper’s [Los Angeles Times] 125th anniversary, Hiller grabbed a microphone and started crooning show tunes.

Buy the Los Angeles Times? Turns out, the Chandler Clan, that infamously tax-averse 170-headed hydra, was most amenable to the idea. They sold out to Tribune Company without even telling their CEO about the negotiations.

Turns out, though, Tribune Company also buys a billion-dollar tax time bomb thimblerigged into the deal by the Chandler’s daedal-handed tax-aversion genie. Due Diligence?

The proxy on the deal suggests it [due diligence] had lasted only two days…[p.222]

On March 10, 2000, Tribune [Company] started “management interviews and due diligence,” the proxy [SEC filing] said, scrutinizing the details of the proposed deal and looking for problems, a process that should take months. On March 12, two days later, The Tribune and Times Mirror boards approved the deal. [p.132]

I’s dotted, T’s crossed, the genie was seated on the new board — along with a few Chandlers. The deal resembled a sale with the massive borrowing and money changing hands, but also curiously resembled a merger in that the Chandler trusts remain linked to the new entity in a Gordian knot of astounding beauty:

For his part…[the Chandler Clan’s tax man] earned an $8 million fee for working both sides of the transaction…

A couple of annual reports later, Mr. Madigan places his lieutenant, Dennis FitzSimons, in the big chair in Tribune Tower and retires to greener pastures as a foundation board member and gray eminence.

Mr. O’Shea finds himself assigned to coach yet another new boss on things journalistic:

As soon as it was apparent that FitzSimons would be the next CEO, [Chicago Tribune editor Howard] Tyner summoned me to his office and asked me to help educate the new boss about what journalists do, as I had with Madigan…He [FitzSimons] thought that journalists, like broadcasters, should use market research to give readers what they wanted, not news that some high priest of the news cycle deemed important…Perhaps more shocking and disheartening to me even than FitzSimons’ market-driven approach to news and his disregard for subjects he didn’t agree with was his lack of curiosity…In 2003, I saw our upcoming [foreign correspondents] conference in Istanbul as an excellent opportunity for educating FitzSimons about journalism, and to my surprise he agreed to attend.”

Mr. O’Shea’s portraiture, fuller and fairer than space allows here, sears images onto the imagination. En route in Chicago traffic to rendezvous at the corporate jet for the ride to Turkey, meet with the foreign correspondents and then interview Turkey’s newly-elected Prime Minister, a call comes:

…we’d been delayed — FitzSimons didn’t have his passport. I assumed that he’d simply neglected to pack it. I was wrong. FitzSimons didn’t know he needed to carry his passport with him…When FitzSimons was informed of the meeting [with the Turkish prime minister at the onset of the Iraq War], he [FitzSimons] told me he could not possibly attend. He had to be back in the United States…He expressed his regrets and told me he wasn’t “like John [Madigan] in these things.” I didn’t ask what was important enough to stiff the prime minister of one of the few moderate Islamic countries that supported America at a time of war in the Middle East.

Later, the staff heard that one of the reasons FitzSimons had wanted to get back to the United States was to attend a baseball game between the Cincinnati Reds and the Chicago Cubs. When [Prime Minister] Erdoğan learned the Tribune CEO wouldn’t attend the interview, he cancelled.  Cincinnati beat the Cubs nine to seven.

Two years later the IRS finds Tribune Company liable for the Chandlers tax time bomb. Lawyering cuts the debt from a billion to $650 million. Another judge in another courtroom dings Tribune Company for yet another Chandler-era crime: cheating advertising customers by lying about circulation. Cost: $100 million.

Next, the Chandler cash habit hits hard. “Civil War,” Mr. O’Shea calls it. FitzSimons borrows a couple billion to buy back stock:

It was a tactic largely viewed as an alternative for weak managers who, in the words of one Tribune [Company] executive, “are not looking out for our tomorrow.”

But the move infuriated the Chandlers… “It was like giving the Chandlers the finger,” Unterman [the Chandler Clan’s tax man] said.

Now things get ugly. The Chandlers effectively put the For Sale sign up — again. A Special Committee at the board level convenes under blue-ribbon leadership. By the time the Special Committee’s work ends, Tribune Company will engage in the most involuted miasma of cross-purposes seller-as-advisor nonsense in the history of the annals of American business. Hundreds of millions of dollars in investment banking fees went into a final deal whose multi-stage months-long closing hinged on everyone agreeing to ignore the fact that the deal would bankrupt the company. The deal bankrupted the company less than a year after the I’s were dotted and the T’s were crossed.  Collateral Damage: Mr. O’Shea was unhorsed by Mr. Hiller who was soon after axed himself in pursuit of ever-increasing efficiencies.

To date, all parties remain absolutely blameless. To date, all parties are locked in an orgy of lawsuits and counter lawsuits that has, so far, generated hundreds of millions of dollars in legal fees in the largest and longest media bankruptcy on record. And there is no end in sight.

Why, though, is Mr. O’Shea’s book universally important? He shows the ease with which moneymen incur debt and ruin companies; he shows the ease with which free inquiry, freedom of the press, investigatory principle and just plain real news can be lost from the Public Discourse; and he shows the ease with which we countenance the loss.

What of journalism under bankruptcy? At this writing, the flagship Chicago Tribune resorted to a mere wire service précis (Reuters) to update its readership on the fire in its own house (the bankruptcy)! Elsewhere last month in journalism, high atop the Page One masthead of the enviably profitable “market-driven” journalistic standard bearing Wall Street Journal, its vaunted nationwide readership sees “Backyard Battleground: Wetter, Better Water Guns” and (days later) “The Best Burger Ever: Flavor Bomb Burgers.” Unless, as Mr. O’Shea implies in his epilogue, Americans come up with alternatives to debt-mongering moneymen for funding “the news,” this, the most complex and dangerous century in human history, will be a lot more complex and dangerous than need be.

A bottom line: In Chapter 9 — Making News — Mr. O’Shea describes how a well-funded news-gathering organization serves a free people like no other endeavor. The piece merits the book’s cover price all by itself.

DISCUSS: Is the Future of Publishing with the Big Six or Start-ups?

Peter Cook’s gravestone will likely read “playwright.” His Uranium + Peaches — a collaboration with Einstein protégé Leo Szilard’s biographer William Lanouette — was included in the season-long symposia of all things Manhattan Project by The Metropolitan Opera during its 125th anniversary season. Of late, he’s in collaboration with the former General Counsel of the third largest news and entertainment media conglomerate on an insider’s look-see into how the largest tax dodge in history began the slide to the largest media bankruptcy in history.  Also, he loves books — and is fascinated by the extractive process of books-to-film. You can reach him at PeterCookWriter.com.

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